The Labor of LIBOR

With the exception of the specialty financial press and one or two general assignment journalists, the media are not making much of the LIBOR scandal. Much easier, and more congruent with The Narrative, I suppose, for the media to continue to chase after the bane of Bain. I mentioned here last week that the real story about LIBOR may well be the massive conflict of interest and collusion between the U.S. Treasury, the Fed, and the big banks to help prop up our massive and ever growing debt.

There’s a huge misdirection taking place. The Obamanauts gave us as their solution to the financial crisis the Dodd-Frank bill, which was supposed to cure “too big to fail.” And what’s one of the first things they do out of the box? Hate on banks for overdraft fees. Yeah—that’s really going to help alleviate financial vulnerability of the system.

But the dirty little secret on Wall Street is that the New York Fed is a horrible regulator: It sees its chief job as keeping the banking system intact. Since it needs its member banks to buy US government debt and to control the money supply, the last thing it wants to do is shed light on the banks’ shady practices.

Which is why the Wall Street power brokers loved Geithner so much: On his New York Fed watch, he basically let them get away with the financial equivalent of murder, letting them take on the astronomical amounts of risk that ultimately blew up the system in 2008.

As Glenn Reynolds likes to say, the country’s in the very best of hands.